1992 (8) TMI 262 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of "gudakhu" or "gurakhu" as tobacco.
2. Taxability under the Bengal Finance (Sales Tax) Act, 1941.
3. Taxability under the West Bengal Sales Tax Act, 1954.
4. Taxability under the Taxes on Entry of Goods into Calcutta Metropolitan Area Act, 1972.

Detailed Analysis:

1. Classification of "Gudakhu" or "Gurakhu" as Tobacco:
The primary issue was whether "gudakhu" or "gurakhu" qualifies as a tobacco product. The respondent argued that "gudakhu" is used for smoking as "tobacco for hookah" and for tooth-gums. The Commercial Tax Officer initially treated "gurakhu" in containers up to 500 gms as tooth-paste, thus taxable, while exempting larger containers as tobacco for hookah. The writ petitioner contended that "gurakhu" is essentially a tobacco product, referencing the Supreme Court's decision in State of Orissa v. Radheshyam Gudakhu Factory, which affirmed that "gudakhu" is a tobacco product. The court agreed, noting that "gurakhu" is manufactured out of tobacco mixed with molasses and other constituents, retaining its essential tobacco character.

2. Taxability under the Bengal Finance (Sales Tax) Act, 1941:
Under the 1941 Act, tobacco for hookah is exempt from tax as per Item No. 18 of Schedule I. The court noted that "gurakhu" falls under this exemption as it is essentially a tobacco product. The court rejected the State's argument that "gurakhu" is not a tobacco product in common parlance, emphasizing that "gurakhu" is understood as a tobacco product and not as a dentifrice. The court concluded that "gurakhu" must be held to be a tobacco product and thus exempt under the 1941 Act.

3. Taxability under the West Bengal Sales Tax Act, 1954:
Section 25 of the 1954 Act states that a commodity taxable under the Bengal Finance (Sales Tax) Act, 1941, can also be taxed under the 1954 Act. However, since "gurakhu" is exempt under the 1941 Act, it cannot be taxed under the 1954 Act. The court noted that the respondents attempted to tax "gurakhu" as dentifrice under the 1954 Act from August 1, 1975, but this was incorrect as "gurakhu" does not meet the description of tooth-paste or dentifrice. The court emphasized that "gurakhu" is a tobacco product and cannot be treated as a dentifrice for taxation purposes under the 1954 Act.

4. Taxability under the Taxes on Entry of Goods into Calcutta Metropolitan Area Act, 1972:
The Entry Tax Act's Schedule lists "gurakhu" along with tooth-paste and tooth-powder. The court noted that merely listing "gurakhu" with these items does not make it taxable as a dentifrice. The court emphasized that "gurakhu" is not understood as tooth-paste or tooth-powder in common parlance or commercially. The court held that "gurakhu" is a tobacco product and thus not subject to entry tax under the Entry Tax Act.

Conclusion:
The court upheld the order of the learned single Judge, confirming that "gudakhu" or "gurakhu" is covered by the expression "tobacco" and is exempt from tax under the Bengal Finance (Sales Tax) Act, 1941, the West Bengal Sales Tax Act, 1954, and the Taxes on Entry of Goods into Calcutta Metropolitan Area Act, 1972. The court also directed the return of Rs. 25,000 cash security furnished by the respondent. The writ appeal was dismissed with no order as to costs.